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Q&A: Zimbabwe's Central Banker Defends Policies

Alternatively heralded as an incompetent fool and a tragic hero, Gideon Gono has been at the center of Zimbabwe's economic decline since he was appointed governor of the country's Reserve Bank in 2003. A ZANU-PF insider and by many accounts president Robert Mugabe's right-hand man, Gono generally keeps himself shielded from the foreign press, fortifying himself in luxury hotels or his 47-bedroom mansion in Harare. Gono is known in some circles as "Mr. Inflation" because he has overseen the printing of billions of dollars in worthless notes, most recently Zimbabwe's trillion-dollar bill, to be launched later this year. But he is more than a central banker. He is thought to have had a hand in many of Zimbabwe's controversial government ventures, from rewarding party loyalists with land to downplaying the magnitude of the cholera epidemic. In an exclusive interview with NEWSWEEK's Alaina Varvaloucas and Jerry Guo in Johannesburg, Gono addresses his critics in the international community. He blames most of his country's woes on Western economic sanctions, though Western officials maintain that the travel and business bans directed at top members of the Mugabe regime cannot undermine an the economy. Gono sees himself as a rags to riches success story with a Puritan work ethic: he says he doesn't drink, only sleeps 4 hours a night, runs daily and has a blood pressure of 120/60. Excerpts:

NEWSWEEK: A lot of people have blamed you for Zimbabwe's economic collapse. GONO: The West wants you to think it's because of mismanagement. But sanctions have had quite a devastating effect on the country. I cannot think of any genocide that is worse that that. By their very nature, sanctions are supposed to induce fear. It's like terrorism. It's callous.

But the United States maintains that the sanctions are targeted towardtop members of Mugabe's regime, like yourself.They do have an impact [on me] but it is the degree of suffering that the world is missing. It's not like I'm an international persona non grata; I often travel. Quite contrary to what the world has been made to believe, the sanctions are not really hitting the middle to high-income bracket. The impact of sanctions is to deny the country access to credit facilities, and then we are unable to import fuel. Then the poor suffer.

Now the global economy is also going through a credit crunch. What do you make of that? I sit back and see the world today crying over the recent credit crunch, becoming hysterical about something which has not even lasted for a year, and I have been living with it for 10 years. My country has had to go for the past decade without credit.

Your critics blame your monetary policies for Zimbabwe's economic problems. I've been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.

Do you feel optimistic about Barack Obama's incoming administration? I don't want anyone to put unnecessary pressure on Obama and hold him to supernatural powers. He's coming into a situation that is untenable already. By the very same standards, I don't like anybody saying if President Mugabe was to go tomorrow, the fortunes of Zimbabweans will change for the better, as if he is personally liable for our situation.

A lot of people do hold Mugabe personally liable. Wouldn't sanctions be lifted, at the very least, if Mugabe lets go of power?[Laughs]. The sanctions will not be lifted because Mugabe leaves office. It is not about Mugabe.

How so? Unless they are engaging in some colossal intellectual honesty, they will not admit the sanctions are political. There are other countries with serious human rights shortfalls, even war, but you find [Western] investors going there.

Would you do anything differently if you had the last five years to do over again? There are certain things, policies with the benefit of hindsight, where we could've managed our affairs better. I don't want to leave you with an impression that Gono or Mugabe are direct descendants of St. John or St. Paul. We are human.

What would you have changed? There is a very high level of indiscipline and corruption in the Zimbabwean economy. I would enact tougher legislation that would ensure offenders would never do it again. I would also deal differently with the critics of our land-reform programs, and invest more in educating them. We were outwitted in the propaganda war. We didn't go out there to explain to the world how our war of liberation came about in the first place.

Is it time to change course then? Only a fool does not change course when it is necessary. Because economics is not an exact science, you want to be able to be relevant. The only constant is change and adaptation.

In November you shut down Zimbabwe's stock exchange. Will you open it again? The stockbrokers were creating a money supply that wasn't there. I printed Z$1.5 quadrillion, but the exchange was operating with Z$100 sextillion. So I said, "Who is doing my job?" Unless there is more discipline and honor, the exchange will stay closed. I can't be bothered. I don't know when it'll open. It's a free market, a business which must be allowed to succeed or fail.

So will 2009 be a year of improvement or disaster? It's got to be a good year. What keeps me bright and looking forward to every day is that it can't be any worse. And those who have studied the history of economies know that we are down, but that the only thing that can happen is we will move up. That is a certainty.

What about the cholera epidemic? Many have called the government's handling of the health crisis a crime. The cholera is under control. I've been personally involved in ensuring that we minimize and finally eliminate the disease. Every year there is a cholera outbreak in southern Africa; the epicenter of the disease just happened to be in Zimbabwe this year.

Do you view your term as a success? It's a mystery to many how I have survived. I am modestly credited with the survival strategy of my country. The issue is if you want to break Zimbabwe and want it to fall, just deal with one man. You deal with Gideon Gono.

That sounds a bit egotistical. I owe a lot of my character and who I am today from a humble background. I was poor. I got my start making tea and keeping house. That is when I developed my own philosophy of life. Don't look down on anybody. I still lay claim that I am the best tea maker in the world. Of cleaning floors and toilets I take pride. I'm a normal guy: I miss going to the supermarket. One would like more freedom.

Do you have constant security? It's elaborate. It's an occupational hazard. If you ask Bernanke or Greenspan, it's the same, but it just differs in intensity. If you raise the interest rate you'll be friends of people who have access to money. If you lower the interest rate, you'll be the darling of borrowers, but pensioners will curse you to hell. It's never about popularity. At all times you are definitely hurting some people in the economy.

Many say you profit off the poverty of others. That is simply not true.

What do you think of your many critics? I have been in the trenches during every moment of survival for my country. Any central bank governor is of necessity. When things go bad, we governors are the fall guys. No other governor in the world has had to deal with the kind of inflation levels that I deal with, no other governor has to come up with the gymnastics and strategy for the survival of his country. But let me say that in my bank resides the cutting edge of the country. I'm privileged to be the leader of that team.

You've been called Mugabe's right-hand man. How closely involved in politics are you? It's impossible to be directing the course of an entire economy and divorce yourself from politics. Politics are important because the turnaround of the economy hinges on political stability, but I can't tell when that will happen.